Monster Beverage (NASDAQ:MNST) Looks To Prolong Its Impressive Returns

What are the early trends we should look for to identify a stock that could multiply in value over the long term? Amongst other things, we'll want to see two things; firstly, a growing return on capital employed (ROCE) and secondly, an expansion in the company's amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Ergo, when we looked at the ROCE trends at Monster Beverage (NASDAQ:MNST), we liked what we saw.

What Is Return On Capital Employed (ROCE)?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. To calculate this metric for Monster Beverage, this is the formula:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.30 = US$2.0b ÷ (US$8.1b - US$1.2b) (Based on the trailing twelve months to September 2024).

Therefore, Monster Beverage has an ROCE of 30%. In absolute terms that's a great return and it's even better than the Beverage industry average of 17%.

Check out our latest analysis for Monster Beverage

Above you can see how the current ROCE for Monster Beverage compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like to see what analysts are forecasting going forward, you should check out our free analyst report for Monster Beverage .

The Trend Of ROCE

We'd be pretty happy with returns on capital like Monster Beverage. Over the past five years, ROCE has remained relatively flat at around 30% and the business has deployed 54% more capital into its operations. With returns that high, it's great that the business can continually reinvest its money at such appealing rates of return. If these trends can continue, it wouldn't surprise us if the company became a multi-bagger.

Our Take On Monster Beverage's ROCE

Monster Beverage has demonstrated its proficiency by generating high returns on increasing amounts of capital employed, which we're thrilled about. And since the stock has risen strongly over the last five years, it appears the market might expect this trend to continue. So while the positive underlying trends may be accounted for by investors, we still think this stock is worth looking into further.

While Monster Beverage looks impressive, no company is worth an infinite price. The intrinsic value infographic for MNST helps visualize whether it is currently trading for a fair price.

High returns are a key ingredient to strong performance, so check out our free list ofstocks earning high returns on equity with solid balance sheets.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.